Posts Tagged http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:GHDHA:2015:3586

Royal Dutch Shell. Watch those stockings. Nigeria / RDS judgment on appeal expected end December.

Postscript 1 March 2016 in Xstrata Limited /Glencore Xstrata plc ., similar issues of corporate social responsibility and liability for a subsidiary’s actions are at stake.

Postscript 18 December: quick update, more to follow: in an interim judgment, jurisdiction was upheld.

I have earlier referred to Shell’s arguments in appeal (in Dutch) on the specific issue of jurisdiction, which may be found here .  Judgment in first instance in fact, as I reported, generally was quite comforting for Shell (and other holding companies in similar situations) on the issue of substantive liability.

However on jurisdiction, the Dutch court’s approach of joinders under residual national jurisdictional rules, was less comforting. The rules on joinders, otherwise known as ‘anchor defendants’, in the Brussels regime (Brussels I as well as the Recast) do not apply to defendants domiciled outside of the EU. Consequently national rules of civil procedure decide whether an action against a daughter company, established outside of the EU, can be successfully anchored to an action against the mother company (against which jurisdiction is easily established per Article 4 of the Recast, Article 2 of the former Regulation). In first instance, the Court at The Hague ruled in favour of joining a non-EU defendant to a case against its mother company in The Netherlands.

In its submission for appeal, Shell (with reference to relevant national case-law) borrows heavily from CJEU case-law on what was Article 6(1) (now Article 8(1)), suggesting that Dutch residual law was meant to apply as a mirror the European regime, with one important difference: precisely the issue that under the Dutch regime, none of the parties need to be domiciled in The Netherlands. Any jurisdictional rule which leads the Dutch courts to accept jurisdiction against one defendant, even if that anchor defendant is not domiciled in the country, can lead to others being drawn into the procedure. This means, so Shell suggests, that the Dutch rule (Article 7(1) of the Dutch code of civil procedure) is more in need of precautions against abuse, than the equivalent European rule.

As part of the efforts to avoid abuse, the Dutch courts need to make a prima facie assessment of the claims against the anchor defendant: for if those claims are spurious, anchoring other claims to such loose ground would be abusive. On this point, the Court of Appeal will have to discuss the corporate veil, piercing it, Chandler v Cape etc. Shell’s submission does not in fact argue why piercing needs to be assessed by the lex causae (here: Nigerian law as the lex loci damni) and not, for instance, by the lex fori. I doubt the Court of appeal will raise it of its own accord. (See here for a consideration of the issues in an unrelated area and further pondering here).

A little bird tells me that appeal judgment will be issued on 18 December. I may or may not be able to review that before the Christmas break. In the negative, it will have to be an Epiphany posting. (Potentially in more than one meaning of the word).

Geert.

 

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What law applies to the piercing of the corporate veil? The Supreme Court (not) in VTB.

Postscript 1 March 2016 I already refered in my initial posting to similar issues being sub judice in Shell. In the appeals judgment on the jurisdiction issue, the Gerechtshof Den Haag, without being definitive on the issue, suggested that applicable law for considering whether merger operations inserting a new mother company were abusive (merely carried out to make Royal Dutch Shell escape its liability), had to be addressed using ‘among others’ the lex incorporationis (at 3.2).

In VTB [[2013] UKSC 5] , the Supreme Court of the United Kingdom revisits in signature erudite fashion a number of extremely relevant conflicts issues.  Quite a few of them are tantalizingly held out to the reader, without an answer to them being given.

VTB’s case is that it was induced in London to enter into a Facility Agreement, and an accompanying interest rate swap agreement, by misrepresentations made by one of the defendants, for which it claims the other respondents are jointly and severally liable. Parties are of suitably diverse domicile (appellant incorporated in England however controlled by a State-owned bank in Moscow; defendants two British Virgin Island-based companies owned and controlled by a Moscow-based Russian businessman. Defendants not being EU-based , the Brussels-I Regulation does not apply.

The issues involved were essentially

1. Jurisdiction. Lord Neuberger made the point that settling the presence (or not) of jurisdiction, is an early procedural incident in a trial and ought not to lead to protracted legal argument, costs and time, lest the discussions centre around whether the potential other jurisdiction can guarantee a fair trial or not. In contrast with other in recent high-profile cases before the UK courts, the alternative, Russian forum, would by common agreement have also offered a fair trial. Lord Neuberger also emphasises, with reference to Lord Bingham in Lubbe v Cape, that in forum non conveniens considerations, appeal judges should defer in principle to the trial judge, and that this should be no different in proceedings concerning service out of jurisdiction. The majority therefore opted to defer to Arnold J (at the High Court) and the Court of Appeal in their finding of jurisdiction, in the absence of any error which ought to have made the former change their conclusion.

2. Applicable law for tortious misrepresentation. This the law of the jurisdiction in which they are ultimately received and relied upon (the forum connogati if you like). In the case at issue, this was held to be England.

3. Applicable law for piercing the corporate veil. The Court emphasises the foundation of individual personality of a company established in Salomon and A Salomon and Co Ltd (1897). The presumption must be against piercing. The Supreme Court did not however set out a definitive test for it was not necessary for its resolving of the case, neither did it decide what law should apply to the issue. In theory, Lord Neuberger suggested, the proper law governing the piercing of the corporate veil (may be) the lex incorporationis, the lex fori, or some other law (for example, the lex contractus, where the issue concerns who is considered to be party to a contract entered into by the company in question). However common ground among parties in the case thus far had been to apply English law.

Piercing the corporate veil was also reviewed by the (Dutch) court in Shell. Lord Neuberger’s succinct analysis of the issue in VTB makes one hungry for more.

Geert.

 

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